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Oil wars and nuclear nightmares

What happens when one day you go to the petrol station and find that there is no more petrol? One of the main worries in many countries these days is that the oil is running out.

All the while, political leaders and corporate tycoons will avoid addressing the principal issue that can slow down global warming and save fast-depleting oil and gas reserves. That is, they will avoid questioning our model of economic growth. For that would mean looking at corporations and the powerful influence they have in brain-washing entire populations that their activities are sustainable.

We are going down a road that is not sustainable and can only lead to darkness and chaos in the future. Let us do something about our wasteful lifestyles. Let us question the power and influence of corporations and the assumption of unending economic growth before the oil dries up and we are forced into a nuclear energy nightmare.

In this piece for the Herald in February, I argued that our economic growth model is seriously flawed:

Rather than turning to conservation and looking at other alternative sources of energy such as solar and wind-power, we are hell bent down the path of producing and consuming even more. That is not surprising given that our whole political-economic-corporate edifice rests on that basic assumption, which is never questioned, of annual economic growth ad infinitum.

Energy Minister Lim Keng Yaik says there is a need to diversify our energy sources, but that does not address the energy requirements of the next generation of Malaysians.

The scary thing is that more and more countries will be tempted to resort to nuclear energy when the oil, gas, coal and hydropower is not enough to meet people’s unquenchable demand.

Even in Malaysia, already we can hear talk of nuclear energy as a possible future source, although Lim dismissed the possibility of that in the immediate future especially in view of the surplus electricity from Bakun Dam in Sarawak. Plans are underway for surplus electricity from Bakun to be channelled via undersea cables to the peninsula while the rest will be taken up by energy-guzzling and polluting aluminium smelter plants in Sarawak. (That is another debacle, too long to go into in this piece.)

Meanwhile, we see the United States already involved in Iraq and Afghanistan. Now they are sending 20,000 more troops to Iraq while the thump of war drums for a possible strike against Iran grows louder. Some analysts say that the US military will pretty soon be turned into a force to protect its energy security needs, including oil wells and pipelines around the world.

Alliances will be formed between countries to address their energy needs and countries will be forced to take sides. We saw how upset a top United States lawmaker was when he found out that a Malaysian firm was involved in a huge energy deal with Iran to develop offshore gas fields in south-eastern Iran and establish liquefied natural gas (LNG) plants. So upset was he that he called on the US administration to suspend discussions for a Free Trade Agreement between Malaysia and the United States. This just goes to show that by signing an FTA, Malaysia would be expected to fall in line with the United States not only in trade matters but also with larger US “strategic goals” anywhere in the world. Meaning, their enemies will become our enemies.

Size does matter: Small is beautiful

We are told Bigger is Better. Big Airports, Big Bridges, Big Corporations, Big Shopping Malls, Big Dams, Bigger Banks, Bigger Plantation Firms, Bigger Highways (oh, what a nuisance, the oil is running out though) and even Big Agriculture. And we measure our well-being by how much we earn (and consume) – as in Per Capita Income levels – and how much more we can produce (the Gross Domestic Product or economic growth rates). We rarely factor into the equation the damage done to the environment or the loss of scarce natural resources.

And everywhere people are working to feed the unquenchable System, which it turn feeds our materialistic and consumerist desires. As a result, many Multinational Corporations today are richer and more powerful than some of the developing countries.

We have talked a lot about this Big Neo-Liberal Economic System. It is a system aided and abetted by politicians and their cronies, who are driven by greed and corruption to further deplete the world of its resources.

The System is decaying, though. The Pax Americana world we live in is tottering, the US dollar highly vulnerable, due to the massive financial deficits in the United States. The dollar is only propped up by demand for US dollars from developing countries and their external reserves maintained in dollars, but that could change as more nations switch to the euro currency.

The housing bubble in the United States is bursting and this could lead to a sharp slowdown in the US economy, precipitating a crisis of sorts. In the Middle East, America is stuck in a quagmire and could worsen matters by taking some sort of military action against Iran, which could overstretch its armies. Faced with the twin threat of global warming and imperial overstretch, the US-influenced global Empire is about to come unstuck.

But what is the alternative to this Empire, you might well ask? In this excerpt from an article I wrote for the Herald, I tried to show that the only way out of the crisis facing humanity today is to adopt simplicity and renunciation as guiding principles in all areas of life and to use small local solutions wherever possible.

First of all, we have to be convinced that…a system based on materialism and greed goes against the basic principles of the Gospel (and for that matter, Buddhist teachings). Think of the call to renunciation (“Sell all your possessions and come, follow me”), simplicity (“The Son of Man has nowhere to lay his head”), and sharing of possessions (The Feeding of the Multitude).

We cannot rely on nation states or national politicians alone to significantly reform such a system – because for the most part, many of them are deeply mired in and compromised by the System. Maybe that is why many people in the developed world, sensing this, have withdrawn from politics, thus contributing to low voter turnouts at elections.

Concerned people and communities must act to bring about the change we want. But what sort of change do we want?

“Small is Beautiful”. That happens to be the title of a series a path-breaking books by Schumacher. No, not the Formula One driver, but E F Schumacher, an economist.

“Ever bigger machines, entailing ever bigger concentrations of economic power and exerting ever greater violence against the environment, do not represent progress: they are a denial of wisdom,” he observed. “Wisdom demands a new orientation of science and technology towards the organic, the gentle, the non-violent, the elegant and beautiful.”

“Man is small and therefore, small is beautiful,” he famously declared.

Heavily influenced by Buddhist economics from his travels to Burma, Schumacher believed that people needed good work to achieve holistic human development. “Production from local resources for local needs is the most rational way of economic life,” he said.

He was also greatly influenced by Catholicism. Catholic Social Teaching (CST) and the thoughts on distributivism by Catholic thinkers such as G K Chesterton resonated with Schumacher’s own thoughts on socio-economic justice. In 1971, Schumacher converted to Catholicism.

Today, people at the local level are beginning to stir. We can also see the signs of this “glocal” approach during the gathering of grassroots groups at the annual World Social Forums, also attended by Christian (including Catholic) groups involved in justice and peace work. At home, we saw it during the local protests against the Broga incinerator and PMPCIII’s call for a revival of basic local communities.

But for change at the local level to blossom, we also need local democracy, which requires elections to town and village councils, something we don’t have in Malaysia. Real local democracy would allow people to participate in the issues that concern them – very much in line with the CST principle of Subsidiarity.

Fudging the real causes of global warming

Although there is now belated recognition of global warming as a critical issue for humanity to grapple with, world leaders and the mainstream media are still fudging the real causes of global warming.

One likely reason for this smokescreen is that global warming has a lot to do with the system of corporate capitalism, which encourages consumption and infinite GDP growth. Many of us are so enamoured with “The System” because it gives us a false illusion of “progress” and comfort (though many others suffer or are exploited by this same system).

In this piece for the Herald, I observed that we are so locked into this system and its illusion that it prevents us from seeing that corporations and consumers are feeding off each other while seriously harming the environment.

The neo-liberal economic system also prevents our leaders from taking decisive action to protect the environment and its people. Instead, they spend a lot of their time protecting the interests of corporations and their corporate cronies.

“…the fundamental point is that, to reach their powerful positions in society, Blair, Brown and other western leaders have had to subordinate the planet’s future to the prerogative of global economic ‘growth’; or, to put it more honestly – to the bottom-line corporate expediency of endless profit benefiting privileged sectors of society,” observed the UK-based Media Lens group, which has produced some outstanding critical analyses of the corporate media. “Any would-be political leader determined to change the current patterns of production and consumption would barely get out of the starting blocks, never mind reach the finishing tape of real political power,” it observed.

This corporate-led system puts capital above labour, profits above people, and GDP economic growth above the environment. Under this system, corporations burn fossil fuels to obtain the energy needed to meet our rising levels of consumption. The corporations are also responsible for fuelling this rise in consumption through their aggressive marketing and promotion strategies and pervasive advertisements. And all the while, they clear the land and cut hills for “development”, pollute rivers with their chemical discharges, emit toxic fumes into the air, and burn more and more fossil fuels.

Even activists feel resigned, thinking that there is no way we can stop this kind of globalisation in its tracks. Sometimes they sigh, “Globalisation is here to stay; we cannot stop it, so what can we do?”

Yes, globalisation is here to stay. But let’s be specific. What kind of globalisation do we really want? Is it corporate-led globalisation that benefits a small fabulously wealthy elite group, widens the gap between the rich and the poor, fuels global warming and exploits workers? Do we really want to live in a world ruled by corporations?

Or would we rather have people-centred globalisation that promotes solidarity with the poor, harmony with Nature, holistic and spiritual growth, and respect for the rights of all?

As long as we do not tackle the real causes of global warming, so long will we have to deal with it apocalyptic results – death, illness, homelessness, famine, and misery.

Changing the model of globalisation will not be easy. But change it we must so that it does not exploit people and the environment. We have to work and struggle for it in our own way. Every little bit will count.

How corporate con-artists “cook the books” and engage in fraud

It is not difficult to “cook the books”, as most accountants will be aware.

But what about the external auditors? They are supposed to be independent and professional, right? In theory. Far too often though, the partners of audit firms develop a cosy relationship with their clients, especially if the audit fee is substantial.

In this article for Aliran Monthly, I discuss some of the common tricks used by financial con-artists and dishonest management/staff in committing fraud or engaging in “creative accounting”. This is by no means an exhaustive expose – just a sample to give you an idea how vulnerable most firms are to fraud and dishonest accounting.

Devious accountants can also manipulate financial results by bringing forward or deferring the recording of expenses in the accounts. Thus, a firm’s management is able to show a higher or a lower profit figure to suit its circumstances. It may want to show a lower profit figure – to save taxes or to provide a cushion for future years. Or it may want to disclose a higher profit figure for the year – to match overly optimistic profit forecasts that were issued earlier to entice investors to buy shares in the firm. This kind of unethical accounting practice is often cynically referred to as “creative accounting” or window-dressing. Full article: EXPOSED – Dark secrets of the private sector

Transmile’s RM333m shocker: Cooking the books in Malaysia

So a special audit of Transmile Group has discovered that its revenue for 2005 and 2006 may have been overstated by over RM500 million ringgit. Gulp! Let me say that again s-l-o-w-l-y: over RM500 million.

And its pre-tax profit for 2006 of RM207 million may have been inflated by RM333 million – which means that its real bottom line should have been a pre-tax loss of RM126 million.

Uh-oh, someone has been very naughty here. Cooking the books, it would appear. A fine work of “creative accounting”, indeed.

And investment analysts have got egg on their face, expressing shock and horror at this turn of events. When news first emerged that something was amiss at Transmile after the firm failed to submit their audited account before the 30 April deadline, it seemed that the market consensus was that the bottom line was overstated by about RM50 million or so.

But I knew something was seriously wrong when I first heard that the external auditors had refused to sign the declaration stating that the accounts showed a true and fair view of the state of affairs of the firm. That refusal should have sent up a wave of red flags. It simply couldn’t have been merely because of a book-keeping error, which could have been easily rectified.

Auditors rarely refuse to sign the accounts – unless something is seriously, seriously wrong.

The real question we should now ask is: how widespread is such dodgy accounting in Malaysia?

Most accountants would be familiar with the tricks of the trade – “creative accounting”, they call it. This involves creating fictitious invoices and dummy sales contracts, for instance. You know, the stuff they don’t teach you in accountancy school. Basic book-keeping entries – such as credit sales, debit debtors – can do “magic” to your bottom line. Another common trick involves playing with provisions for doubtful debts and stock losses – or not making enough provisions.

Accountants and management often have an intuitive feel for what kind of bottom-line the market (or their board of directors or key shareholders) is expecting. When their promotion prospects, stock option prices or bonuses depend on what kind of profit they deliver, devious management staff can easily “massage” the figures until they reach a “profit” that is within the range the market (or top management) is expecting. As for junior accounting staff, they often know when they see accounting entries or dummy invoices that are false or concocted. But they are usually too afraid to refuse to enter such transactions in the books for fear of losing their jobs.

About a decade ago, I sent in an article to the journal of the Malaysian Institute of Accountants titled “My boss wants me to cook the books” or something to that effect. In that article, I discussed what accountants and other financial staff could do if ever they faced pressure from their bosses to manipulate the accounts or to put in false entries. The article was never published.

Anyway, this is a piece I wrote a couple of days ago for Asia Times Online – before the preliminary findings of the special audit on Transmile were reported. You will see that Transmile is not the only firm to practise “fancy accounting”:

PENANG, Malaysia – Dodgy accounting at a handful of prominent listed companies has put the spotlight back on Malaysia’s financial reporting and corporate governance. Not only has it taken the shine off the stock market’s recent good performance, which is only now emerging from the doldrums of the 1997-98 Asian financial crisis, but it has cast a shadow over recent upbeat investor sentiment. Full article: Cooking the books in Malaysia